sbf actions seem to be directly inspired by his effective altruism believes. He mentioned a few times on podcasts that his philosophy was: Make the most money possible, whatever the way, and then donate it all in the best way to improve the world. He was only in crypto because he thought this was the place where he could make the most money.
sbf was first a trader for Alameda and then started FTX
some actions that Alameda/FTX was known for:
*Using exchange data to trade against their own customers
*Paying twitter users money to post tweets with the intention of promoting ftx, hurting competitors, and manipulating markets
*Creating ponzi coins with no usage with the only intention of selling these for the highest price possible to naive users. Entire ecosystems were created for this goal.
The typical plan was:
1.Fund a team to create a new useless token. 2% of coins to public, 98% to investors who get it year later. 2. Create manipulation story for why this project is useful. 3.Release news item: Alameda invested in x coin (because alameda had a good reputation at first). 4. pump up the price as high as they can using twitter influencers. 5. list the coin on FTX so investors can hedge position. 6. Alameda has another coin they can trade around and liquidate speculators based on the data they get from ftx.7. repeat x20
*Lying and predatory behavior
It seems like they took most actions based on a “expected value” approach, calculating which of possible options would on average make them more money.
including decisions like lying or telling the truth , breaking the law yes or no ,and building reputation for only goal of being more effective at manipulation later on.
I think this expected value approach made them super succesful traders. And they stayed with strictly the same approach when running the exchange. This is where things are going wrong. In social interactions and situations when your actions impact other people you should also think about things like your reputation, or what would happen if everyone starts acting like you.
Otherwise, you could rationalize pretending to be friends with your neighbours and then murdering them to give their money away to the poor.Maybe it seems like a good action on paper for a naive utilitarian but if everyone would act like this things would break down.
I think another factor of this outcome with sbf is narcissistic personality. Something like Effective Altruism can feel emotionally attractive for people like this because it implies, they can do things “better”, or “more effective”. It feeds the need for superiority. And then they rationalize everything with, its good for the world, i will be 10x as effective with the money than others etc. It could be true, but it could also not be true and it might not be the real reason why they are acting in this way.
I think effective altruism works better when blended with normal human behavior and moral principles like: “try generally to tell the truth”, “dont steal from your users.”
This is very important if true, because it suggests with due diligence, EA leaders could have known that it was morally dodgy to be associated with FTX, even before the current blow-up. In comparison if the story is “previously reasonably ethical by finance standards trader steals to cover losses in a panic”, then while you can say there is always some risk of something like that, it’s not really the kind of thing where you can blame people for associating with someone with beforehand. I think it’d be good if some EA orgs had a proper look into which of these narratives is more correct when they do a post-mortem on this whole disasters.
I deep-dived into crypto in the latter half of 2020 because I was curious what was going on there. It took me a few months to see but what’s said in the top-level comment were basically all true back then. I started my learning from scratch with an open mind, I would imagine had one looked into SBF activities with due diligence in mind, questionable behavior would be obvious to see.
Counterpoint to “had one looked into SBF activities with due diligence in mind, questionable behavior would be obvious to see”:
Many high profile VC firms invested in FTX (e.g. Sequoia, SoftBank, BlackRock). They raised at astronomical valuations as recently as January of this year. It seems unlikely to me that any due diligence into the inner workings of the business by EA higher-ups would have come up with something that these VCs apparently did not.
OTOH, I’ve been following crypto closely for a little over a year now and I had heard rumblings along the lines of the top-level comment. It is my impression that most (maybe all) of the assumptions of bad behavior were based on speculation and circumstantial evidence rather than hard proof.
Perhaps that speculation and circumstantial evidence was enough to be careful with too closely associating with SBF/FTX, I don’t know, but it seems unlikely to me that due diligence before the last few days would have revealed obvious bad behavior.
Counterpoint to this: a lot of VC investments in crypto were very dodgy. I can’t recall exact project names, but I remember regularly seeing news of the form “a16z just backed us with 300M!” on projects which are clearly zero-sum and don’t have the market cap to generate >300M in fees, like blockchain games. VC investment doesn’t seem like as strong a signal in the crypto space as in other spaces.
This seems to be a case for ‘trust but verify’ - it’s also worth remembering that reputational risk and purposes rebound differently for different participants.
You really need to provide proof for these sweeping allegations. I know people are worried with the current situation and I agree fraud is likely, but I’m concerned that someone making such extreme claims with 0 links or evidence besides claiming to be an insider is so highly upvoted.
If you make an extreme claim, the burden of providing sources is on you.
This is not ‘just the way crypto functions’. There is very wide variance in the ethical integrity of different crypto protocols and projects.
Bitcoin is one thing.
Highly decentralized layer-1 protocols such as Cardano and Ethereum are another thing.
Oracle protocols such as Chainlink are another.
Centralized exchanges vary a lot—Kraken seems to have quite high openness, integrity, transparency, and auditability; whereas FTX did not.
There are lots of scammers in crypto. There are also many highly ethical, honest, and constructive leaders.
Just as it would be a shame for outsiders to reject EA as fraudulent just because FTX was, it would be a shame for EAs to reject all crypto as fraudulent just because FTX was.
Thanks a lot for joining the discussion and sharing these observations, that’s super valuable info and imo extremely damning if true. Do you happen to have some sources I could check which corroborate what you’ve written here?
Paying twitter users money to post tweets with the intention of promoting ftx, hurting competitors, and manipulating markets
Creating ponzi coins with no usage with the only intention of selling these for the highest price possible to naive users. Entire ecosystems were created for this goal.
Do you have any evidence for these two? Not challenging you, just curious. E.g. Twitter users who admitted to being paid by FTX, or examples of coins that FTX/Alameda created in the way you describe, that sort of thing.
it was mostly the SOLANA ecosystem coins: like Oxygen, Raydium, MAPS, All of them were created with the playbook of a very low float (initial available tokens) and very high fully diluted valuation (98% of the tokens would be released to investors later on).
You could check the graph of these coins , all these dropped 95-99% in value after investor tokens unlocks started. By this time the big investors already hedged (shorted) the tokens on ftx so they could lock in the value at the higher prices.
As a note, while I agree people though that via Alamada, FTX was “Using exchange data to trade against their own customers”, the fact that Alamaeda lost so much money confuses me as to if this was actually true.
Hey, crypto insider here.
sbf actions seem to be directly inspired by his effective altruism believes. He mentioned a few times on podcasts that his philosophy was: Make the most money possible, whatever the way, and then donate it all in the best way to improve the world. He was only in crypto because he thought this was the place where he could make the most money.
sbf was first a trader for Alameda and then started FTX
some actions that Alameda/FTX was known for:
*Using exchange data to trade against their own customers
*Paying twitter users money to post tweets with the intention of promoting ftx, hurting competitors, and manipulating markets
*Creating ponzi coins with no usage with the only intention of selling these for the highest price possible to naive users. Entire ecosystems were created for this goal.
The typical plan was:
1.Fund a team to create a new useless token. 2% of coins to public, 98% to investors who get it year later. 2. Create manipulation story for why this project is useful. 3.Release news item: Alameda invested in x coin (because alameda had a good reputation at first). 4. pump up the price as high as they can using twitter influencers. 5. list the coin on FTX so investors can hedge position. 6. Alameda has another coin they can trade around and liquidate speculators based on the data they get from ftx.7. repeat x20
*Lying and predatory behavior
It seems like they took most actions based on a “expected value” approach, calculating which of possible options would on average make them more money.
including decisions like lying or telling the truth , breaking the law yes or no ,and building reputation for only goal of being more effective at manipulation later on.
I think this expected value approach made them super succesful traders. And they stayed with strictly the same approach when running the exchange. This is where things are going wrong. In social interactions and situations when your actions impact other people you should also think about things like your reputation, or what would happen if everyone starts acting like you.
Otherwise, you could rationalize pretending to be friends with your neighbours and then murdering them to give their money away to the poor.Maybe it seems like a good action on paper for a naive utilitarian but if everyone would act like this things would break down.
I think another factor of this outcome with sbf is narcissistic personality. Something like Effective Altruism can feel emotionally attractive for people like this because it implies, they can do things “better”, or “more effective”. It feeds the need for superiority. And then they rationalize everything with, its good for the world, i will be 10x as effective with the money than others etc. It could be true, but it could also not be true and it might not be the real reason why they are acting in this way.
I think effective altruism works better when blended with normal human behavior and moral principles like: “try generally to tell the truth”, “dont steal from your users.”
This is very important if true, because it suggests with due diligence, EA leaders could have known that it was morally dodgy to be associated with FTX, even before the current blow-up. In comparison if the story is “previously reasonably ethical by finance standards trader steals to cover losses in a panic”, then while you can say there is always some risk of something like that, it’s not really the kind of thing where you can blame people for associating with someone with beforehand. I think it’d be good if some EA orgs had a proper look into which of these narratives is more correct when they do a post-mortem on this whole disasters.
I deep-dived into crypto in the latter half of 2020 because I was curious what was going on there. It took me a few months to see but what’s said in the top-level comment were basically all true back then. I started my learning from scratch with an open mind, I would imagine had one looked into SBF activities with due diligence in mind, questionable behavior would be obvious to see.
Counterpoint to “had one looked into SBF activities with due diligence in mind, questionable behavior would be obvious to see”:
Many high profile VC firms invested in FTX (e.g. Sequoia, SoftBank, BlackRock). They raised at astronomical valuations as recently as January of this year. It seems unlikely to me that any due diligence into the inner workings of the business by EA higher-ups would have come up with something that these VCs apparently did not.
OTOH, I’ve been following crypto closely for a little over a year now and I had heard rumblings along the lines of the top-level comment. It is my impression that most (maybe all) of the assumptions of bad behavior were based on speculation and circumstantial evidence rather than hard proof.
Perhaps that speculation and circumstantial evidence was enough to be careful with too closely associating with SBF/FTX, I don’t know, but it seems unlikely to me that due diligence before the last few days would have revealed obvious bad behavior.
Counterpoint to this: a lot of VC investments in crypto were very dodgy. I can’t recall exact project names, but I remember regularly seeing news of the form “a16z just backed us with 300M!” on projects which are clearly zero-sum and don’t have the market cap to generate >300M in fees, like blockchain games. VC investment doesn’t seem like as strong a signal in the crypto space as in other spaces.
This seems to be a case for ‘trust but verify’ - it’s also worth remembering that reputational risk and purposes rebound differently for different participants.
You really need to provide proof for these sweeping allegations. I know people are worried with the current situation and I agree fraud is likely, but I’m concerned that someone making such extreme claims with 0 links or evidence besides claiming to be an insider is so highly upvoted.
If you make an extreme claim, the burden of providing sources is on you.
These aren’t as extreme as they seem. They are genuinely just the way crypto functions. Here is a link to SBF, this past April, explaining how one of the largest “income” generating systems in crypto (that he also engaged heavily in, and in a way helped to popularize) is a ponzy scheme, and being totally unworried about stating this fact. https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned
This is not ‘just the way crypto functions’. There is very wide variance in the ethical integrity of different crypto protocols and projects.
Bitcoin is one thing.
Highly decentralized layer-1 protocols such as Cardano and Ethereum are another thing.
Oracle protocols such as Chainlink are another.
Centralized exchanges vary a lot—Kraken seems to have quite high openness, integrity, transparency, and auditability; whereas FTX did not.
There are lots of scammers in crypto. There are also many highly ethical, honest, and constructive leaders.
Just as it would be a shame for outsiders to reject EA as fraudulent just because FTX was, it would be a shame for EAs to reject all crypto as fraudulent just because FTX was.
Thanks a lot for joining the discussion and sharing these observations, that’s super valuable info and imo extremely damning if true. Do you happen to have some sources I could check which corroborate what you’ve written here?
Do you have any evidence for these two? Not challenging you, just curious. E.g. Twitter users who admitted to being paid by FTX, or examples of coins that FTX/Alameda created in the way you describe, that sort of thing.
it was mostly the SOLANA ecosystem coins: like Oxygen, Raydium, MAPS, All of them were created with the playbook of a very low float (initial available tokens) and very high fully diluted valuation (98% of the tokens would be released to investors later on).
SBF on Twitter: “11) Paypal is likely the product with the largest userbase in crypto, at around 300m. Soon, the second largest will probably be MAPS.” / Twitter
You could check the graph of these coins , all these dropped 95-99% in value after investor tokens unlocks started. By this time the big investors already hedged (shorted) the tokens on ftx so they could lock in the value at the higher prices.
Hsaka on Twitter: “The greatest transfer of wealth this cycle has been from ignorant plebs to the Alameda/Solana/FTX VC crew running the low float high FDV scam. Tis a feature, not a bug, since people still continue to willingly donate their money.” / Twitter
As somebody in the industry I have to say Alameda/FTX pushing MAPS was surreal and cannot be explained as good faith investing by a competent team.
Thanks, that seems really bad and deceptive. Do you also have examples of tweets or people that were paid off by FTX to promote one of those coins?
As a note, while I agree people though that via Alamada, FTX was “Using exchange data to trade against their own customers”, the fact that Alamaeda lost so much money confuses me as to if this was actually true.